profitepaper pakistantoday 02nd july, 2012
2
WALL STREET WEEK AHEAD EU DEAL FOR SPAIN, ITALY BUOYS MARKETS BUT DETAILS SKETCHY Monday, 2 July, 2012 Page 02 How to make trade easier BRUSSELS AGENCIES T HEY also pledged to create a single banking supervisor for euro zone banks based around the European Central Bank in a landmark first step towards a European banking union that could help shore up struggling member Spain. “It is a first step to break the vicious circle between banks and sovereigns,” European Council President Herman Van Rompuy told a final news conference after talks which stretched right through the night. The deal was widely seen as a political victory for embattled Italian Prime Minister Mario Monti and his Spanish counterpart, Mariano Rajoy, over German Chancellor Angela Merkel, who had brushed aside any need for such emergency measures earlier this week. ECB President Mario Draghi en- dorsed the “tangible results”, which sent the euro nearly 2 percent higher and sharply cut Spanish and Italian bond yields. European shares rose, led by banking stocks buoyed by the prospect of moves to backstop the financial system. “I am actually quite pleased with the outcome of the European Council. It showed the long-term commitment to the euro by all member states of the euro area,” Draghi told reporters. Market participants welcomed the outcome as a substantial step to restore confidence in the 17-nation euro zone, which was saluted by a more durable rally than previous summit outcomes. “It’s inching closer to a banking union, and the closer we get to a banking union would put (the EU) well on the road to a fiscal union,” said Art Hogan, managing director of Lazard Capital Mar- kets in New York. Most economists polled by Reuters expect the ECB to cut borrowing costs at its July 5 meeting, which takes place against a darkening economic backdrop. But internal resistance to the central bank reviving its bond-buying program remains high. After 14 hours of tense talks that ended at 4:30 a.m. (0230 GMT), the 17 leaders agreed on a series of short-term steps to shore up their monetary union and bring down the bor- rowing costs of Spain and Italy, seen as too big to bail out. To that end the euro zone’s tempo- rary EFSF and permanent ESM rescue funds will be used “in a flexible and effi- cient manner in order to stabilize mar- kets” to support countries that comply with EU budget policy recommendations, a joint statement said. It gave few specifics, but euro zone of- ficials said the funds could buy bonds on both the primary and secondary markets on the basis of a memorandum of under- standing signed with the requesting state and up to a funding limit to be agreed. Both Italy and Spain said they did not intend to call on that mechanism to stabilize markets for now, hoping the Brussels agreement will serve as a sufficient deterrent. Washington said it was encouraged by the progress but White House press secretary Jay Carney told reporters travelling with President Barack Obama that “a lot of details” still needed to be worked out, and the euro zone was likely to need to take further steps in the future. The International Monetary Fund said the summit had taken “the right steps toward completing monetary union” while ratings agency Fitch said the deal eased near-term pressure on euro zone sovereign ratings. UNTHINKABLE DECISIONS: In a key concession by EU paymaster Germany, the leaders agreed to waive the ESM’s pre- ferred creditor status on lending for Span- ish banks, removing a key deterrent to investors buying Spanish government bonds, who feared having to take the first losses in any debt restructuring. “We have taken decisions that were unthinkable just some months ago,” Euro- pean Commission President Jose Manuel Barroso said. Despite the concessions by Berlin allowing euro zone rescue funds to be used more flexibly, questions remained about the terms, size and supervision of any future aid for Spain and Italy. There was also no commitment for now to back up a European bank super- visor with a joint deposit guarantee or a common resolution fund, to avert capital flight and taxpayer losses. However, one EU official said that letting the ESM lend directly to banks once the supervisory body is up and running was a backdoor route to closer fiscal union. Monti, determined to avoid the polit- ical stigma of the bailout terms imposed on Greece, Ireland and Portugal, said countries that complied with EU budget recommendations would not face extra austerity conditions or be subject to in- trusive inspections by a “troika” of inter- national lenders. Eager to avoid the impression that she had blinked first, Merkel said strict conditionality would still apply to the use of rescue funds and countries would face stringent monitoring by the EU Commis- sion and the ECB. Asked if she had yielded to pressure, she said: “There is clearly pressure from financial markets. Some countries are in a difficult situation. The high interest rates affect the debt but also the real economy. We had an interest in finding solutions.” Merkel reaffirmed her firm opposition to common euro zone bonds. She later won resounding approval in the lower house of the parliament in Berlin for funding the ESM and for new EU budget rules. A similar vote in the upper house was expected later in the day, though Germany’s constitutional court may still object. The Spanish and Italian leaders had threatened to block a package of measures to promote growth to pressure Merkel to accept measures to ease their borrowing costs, delaying the talks. New French Pres- ident Francois Hollande backed their calls for bold steps to help the bloc’s third and fourth biggest economies, adding to the pressure on Merkel. Hollande, who had demanded a rene- gotiation of the fiscal pact to switch Eu- rope’s focus from austerity to promoting growth, said he had achieved satisfaction at the summit and would now submit the treaty to parliament for ratification. While Hollande could claim a step forward in “solidarity”, Merkel achieved little immediate progress on her demands for EU authorities to be given the power to override national budgets and eco- nomic policies. The issue was kicked down the road to October, when top EU officials led by Van Rompuy will deliver a more detailed report. CAUTIOUS OPTIMISM: Economists applauded both the short-term measures to steady markets and the longer-term di- rection, saying that for once, after 20 summits since the crisis began in early 2010, euro zone leaders had exceeded ad- mittedly low expectations. “I think the ECB being made the banking supervisor is actually the biggest long-term step because it points the way to banking union,” said Megan Greene, analyst at Roubini Global Economics, which is often gloomy about the euro zone’s future. “The move to recapitalize banks directly is a big deal and will help to break the ‘vicious circle’ between banks and sovereigns that has been at the very heart of this crisis,” said ABN AMRO economist Nick Kounis, although he added that the euro zone remained “in a muddling-through scenario”. The ESM’s ability to inject capital di- rectly into banks will come too late to help Spain recapitalize its debt-laden lenders immediately this year, but it should allow Madrid to remove the cleanup from state books next year, euro zone officials said. Merkel said finance ministers would have to work out whether the state or the banks would be legally responsible for repay- ment of the loans thereafter. Some analysts were more skeptical about the benefits of the deal, given the level of detail left open. Ireland, which had to take an EU/IMF bailout in 2010 after suffering a similar bank meltdown and property bust to Spain, hailed the de- cisions as a “game changer”, saying it would seek similarly favorable conditions for its own taxpayers. SECP re-launching amnesty schemes for two months ISLAMABAD ONLINE The Securities and Exchange Commission of Pakistan (SECP) in order to facilitate the corporate sector have decided to re-launch the Companies Regularization Scheme (CRS) and Companies Easy Exit Scheme (CEES) for a period of two months starting from July 2 to August 31, 2012. The purpose of this initiative is to provide both facilities to the companies at the same time, either to get their defaults regularized under CRS by making compliance, or benefit from the exit facility under CEES, if the company is defunct, not doing any business or not in operation and intends to cease its existence. The CRS provides defaulter companies an opportunity to file their overdue statutory returns and annual accounts. This scheme is applicable to all unlisted companies. Initially, in July the overdue documents can be filed with normal filing fee plus one half of the normal filing fee as additional filing fee. However, in August the fees shall increase to normal filing fee plus one time additional filing fee. This scheme also absolves the defaulter companies of penalties imposed on filing of overdue documents. The CEES allows the companies having no assets or liabilities and not doing any business to avail themselves of easy exit facility without undergoing the cumbersome winding up procedure. NEW YORK AGENCIES The S&P 500 and the Nasdaq posted their best daily percentage gains since December on Friday after an agreement by European leaders to stabilize the region’s troubled banks, a pact that helped remove some of the uncertainty that has plagued markets. “That is the major question. Can this fuel a longer- term rally? It can, but only to some degree if, over the weekend and the course of next week, we don’t see any major push back or headlines that suggest that this deal is not going to happen,” said Quincy Krosby, a market strategist at Prudential Financial. “But I don’t think this is a major game changer. I do, however, think that this is really the first time we got a relatively immediate answer to what they (the euro-zone leaders) are going to do about the issue.” Under pressure to prevent a catastrophic breakup of their single currency, euro-zone leaders agreed on Friday to let their rescue fund inject aid directly into stricken banks starting next year and intervene in bond markets to support troubled member-states. They also pledged to create a single banking supervisor for euro- zone banks based around the European Central Bank in a landmark first step toward a European banking union that could help shore up struggling member Spain. PARTY TIME: Wall Street’s previous reaction to euro-zone bailout packages or other rescue plans had been somewhat muted. Initial gains would quickly dis- appear by the day’s end as investors realized that there isn’t a quick fix to the region’s problems. On Friday, it was a different story. The three major U.S. stock indexes jumped 1.5 percent to 2 percent shortly after the opening bell on news of the euro-zone agreement. By the close, stocks ended at session highs with the major indexes up between 2 percent and 3 per- cent. The Dow Jones industrial average .DJI surged 277.83 points, or 2.20 percent, to end at 12,880.09. The Standard & Poor’s 500 Index .SPX jumped 33.12 points, or 2.49 percent, to finish at 1,362.16. And the Nasdaq Composite Index .IXIC shot up 85.56 points, or 3.00 percent, to close at 2,935.05. For the week, the Dow rose 1.9 percent, the S&P 500 advanced 2 percent and the Nasdaq gained 1.5 percent. For the month, the Dow added 3.9 percent, the S&P 500 rose 4 percent and the Nasdaq climbed 3.8 percent. But for the second quarter, the Dow dropped 2.5 percent, the S&P 500 slid 3.3 percent and the Nasdaq lost 5.1 percent. Despite the weak second quarter, the three major U.S. stock indexes wrapped up the first half of the year with decent gains: The Dow was up 5.4 percent, the S&P 500 was up 8.3 percent and the Nas- daq was up 12.7 percent. “The next question is whether the ESM/EFSF will have enough capital and assuming they don’t, will the ECB chip in by giving it a bank license, thus leveraging its size. That is yet to be determined,” said Peter Boock- var, equity strategist at Miller Tabak & Co in New York. “For now, party on and turn that hourglass over as more time has been bought. But only the symptoms are being fought as the underlying disease of excessive debt and lack of growth still remains.” The leaders of the 17 European Union countries agreed on a series of short-term steps to shore up their monetary union and bring down the borrowing costs of Spain and Italy, seen as too big to bail out. To that end, the euro zone’s temporary European Financial Stability Facility (EFSF) and permanent Eu- ropean Stability Mechanism (ESM) rescue funds will be used “in a flexible and efficient manner in order to stabilize markets” to support countries that comply with EU budget policy recommendations, a joint state- ment said. Any market reaction to further develop- ments next week could be exaggerated by lighter-than-usual volume. Wall Street trading desks may be more sparsely populated because it will be a short week. The U.S. stock market will be closed on Wednesday, the Fourth of July, in observance of Inde- pendence Day. That could break any weekly momen- tum when Wall Street resumes trading on Thursday. ALL EYES ON THE ECB: The market’s focus shifts to the European Central Bank next week as investors wait to see whether it cuts interest rates to complement the measures taken by EU leaders to shore up banks and bring down borrowing costs for Spain and Italy. Most economists polled by Reuters expect the ECB to cut borrowing costs on Thursday, July 5, at its meet- ing, which takes place against a darkening economic backdrop. But internal resistance to the central bank reviving its bond-buying program remains high. The ECB has already loosened its collateral rules to make it easier for banks in Spain to access its funds. “Investors have to be cautious because the market may be getting ahead of itself. We really don’t have any details. The big question is still what direction the ECB takes next week,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. “It’s (the EU deal) certainly not a silver bullet for the debt crisis, but the market is kind of acting like it is. It may set us up for another push down in the weeks ahead.” Can EU deal lift stocks for more than a day? Gracias! Under pressure to prevent a catastrophic breakup of their single currency, euro zone leaders agreed to let their rescue fund inject aid directly into stricken banks from next year and intervene on bond markets to support troubled member states Stocks finished the first half of the year with a bang as investors welcomed news that the euro zone is a step closer to solving its 30-month-long debt crisis. Now for the question: Is this rally strong enough to last for more than a day? PRO 02-07-2012_Layout 1 7/2/2012 12:39 AM Page 1
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profitepaper pakistantoday 02nd july, 2012
Transcript of profitepaper pakistantoday 02nd july, 2012
WALL STREET WEEK AHEAD
EU DEAL FOR SPAIN, ITALY BUOYS MARKETS BUT DETAILS SKETCHY
Monday, 2 July, 2012
Page 02
How to make trade easier
BRUSSELS
AGENCIES
THEY also pledged to create asingle banking supervisor foreuro zone banks based aroundthe European Central Bank ina landmark first step towards
a European banking union that could helpshore up struggling member Spain.
“It is a first step to break the viciouscircle between banks and sovereigns,”European Council President Herman VanRompuy told a final news conferenceafter talks which stretched right throughthe night. The deal was widely seen as apolitical victory for embattled ItalianPrime Minister Mario Monti and hisSpanish counterpart, Mariano Rajoy,over German Chancellor Angela Merkel,who had brushed aside any need for suchemergency measures earlier this week.
ECB President Mario Draghi en-dorsed the “tangible results”, which sentthe euro nearly 2 percent higher andsharply cut Spanish and Italian bondyields. European shares rose, led bybanking stocks buoyed by the prospect ofmoves to backstop the financial system.
“I am actually quite pleased with theoutcome of the European Council. Itshowed the long-term commitment to theeuro by all member states of the euroarea,” Draghi told reporters.
Market participants welcomed theoutcome as a substantial step to restoreconfidence in the 17-nation euro zone,which was saluted by a more durable rally
than previous summit outcomes.“It’s inching closer to a banking
union, and the closer we get to a bankingunion would put (the EU) well on theroad to a fiscal union,” said Art Hogan,managing director of Lazard Capital Mar-kets in New York.
Most economists polled by Reutersexpect the ECB to cut borrowing costs atits July 5 meeting, which takes placeagainst a darkening economic backdrop.But internal resistance to the centralbank reviving its bond-buying programremains high. After 14 hours of tensetalks that ended at 4:30 a.m. (0230GMT), the 17 leaders agreed on a seriesof short-term steps to shore up theirmonetary union and bring down the bor-rowing costs of Spain and Italy, seen astoo big to bail out.
To that end the euro zone’s tempo-rary EFSF and permanent ESM rescuefunds will be used “in a flexible and effi-cient manner in order to stabilize mar-kets” to support countries that complywith EU budget policy recommendations,a joint statement said.
It gave few specifics, but euro zone of-ficials said the funds could buy bonds onboth the primary and secondary marketson the basis of a memorandum of under-standing signed with the requesting stateand up to a funding limit to be agreed. BothItaly and Spain said they did not intend tocall on that mechanism to stabilize marketsfor now, hoping the Brussels agreementwill serve as a sufficient deterrent.
Washington said it was encouraged
by the progress but White House presssecretary Jay Carney told reporterstravelling with President Barack Obamathat “a lot of details” still needed to beworked out, and the euro zone waslikely to need to take further steps inthe future.
The International Monetary Fundsaid the summit had taken “the rightsteps toward completing monetaryunion” while ratings agency Fitch said thedeal eased near-term pressure on eurozone sovereign ratings.UNTHINKABLE DECISIONS: In a keyconcession by EU paymaster Germany,the leaders agreed to waive the ESM’s pre-ferred creditor status on lending for Span-ish banks, removing a key deterrent toinvestors buying Spanish governmentbonds, who feared having to take the firstlosses in any debt restructuring.
“We have taken decisions that wereunthinkable just some months ago,” Euro-pean Commission President Jose ManuelBarroso said. Despite the concessions byBerlin allowing euro zone rescue funds tobe used more flexibly, questions remainedabout the terms, size and supervision ofany future aid for Spain and Italy.
There was also no commitment fornow to back up a European bank super-visor with a joint deposit guarantee or acommon resolution fund, to avert capitalflight and taxpayer losses. However, oneEU official said that letting the ESM lenddirectly to banks once the supervisorybody is up and running was a backdoorroute to closer fiscal union.
Monti, determined to avoid the polit-ical stigma of the bailout terms imposedon Greece, Ireland and Portugal, saidcountries that complied with EU budgetrecommendations would not face extraausterity conditions or be subject to in-trusive inspections by a “troika” of inter-national lenders.
Eager to avoid the impression thatshe had blinked first, Merkel said strictconditionality would still apply to the useof rescue funds and countries would facestringent monitoring by the EU Commis-sion and the ECB.
Asked if she had yielded to pressure,she said: “There is clearly pressure fromfinancial markets. Some countries are ina difficult situation. The high interestrates affect the debt but also the realeconomy. We had an interest in findingsolutions.” Merkel reaffirmed her firmopposition to common euro zone bonds.
She later won resounding approval inthe lower house of the parliament inBerlin for funding the ESM and for newEU budget rules. A similar vote in theupper house was expected later in theday, though Germany’s constitutionalcourt may still object.
The Spanish and Italian leaders hadthreatened to block a package of measuresto promote growth to pressure Merkel toaccept measures to ease their borrowingcosts, delaying the talks. New French Pres-ident Francois Hollande backed their callsfor bold steps to help the bloc’s third andfourth biggest economies, adding to thepressure on Merkel.
Hollande, who had demanded a rene-gotiation of the fiscal pact to switch Eu-rope’s focus from austerity to promotinggrowth, said he had achieved satisfactionat the summit and would now submit thetreaty to parliament for ratification.
While Hollande could claim a stepforward in “solidarity”, Merkel achievedlittle immediate progress on her demandsfor EU authorities to be given the powerto override national budgets and eco-nomic policies. The issue was kickeddown the road to October, when top EUofficials led by Van Rompuy will deliver amore detailed report.CAUTIOUS OPTIMISM: Economistsapplauded both the short-term measuresto steady markets and the longer-term di-rection, saying that for once, after 20summits since the crisis began in early2010, euro zone leaders had exceeded ad-mittedly low expectations.
“I think the ECB being made thebanking supervisor is actually the biggestlong-term step because it points the wayto banking union,” said Megan Greene,analyst at Roubini Global Economics,which is often gloomy about the eurozone’s future. “The move to recapitalizebanks directly is a big deal and will helpto break the ‘vicious circle’ between banksand sovereigns that has been at the veryheart of this crisis,” said ABN AMROeconomist Nick Kounis, although headded that the euro zone remained “in amuddling-through scenario”.
The ESM’s ability to inject capital di-rectly into banks will come too late to helpSpain recapitalize its debt-laden lendersimmediately this year, but it should allowMadrid to remove the cleanup from statebooks next year, euro zone officials said.Merkel said finance ministers would haveto work out whether the state or the bankswould be legally responsible for repay-ment of the loans thereafter.
Some analysts were more skepticalabout the benefits of the deal, given thelevel of detail left open. Ireland, whichhad to take an EU/IMF bailout in 2010after suffering a similar bank meltdownand property bust to Spain, hailed the de-cisions as a “game changer”, saying itwould seek similarly favorable conditionsfor its own taxpayers.
SECP re-launching
amnesty schemes
for two months ISLAMABAD
ONLINE
The Securities and ExchangeCommission of Pakistan (SECP) inorder to facilitate the corporate sectorhave decided to re-launch theCompanies Regularization Scheme(CRS) and Companies Easy ExitScheme (CEES) for a period of twomonths starting from July 2 to August31, 2012. The purpose of this initiativeis to provide both facilities to thecompanies at the same time, either toget their defaults regularized underCRS by making compliance, or benefitfrom the exit facility under CEES, if thecompany is defunct, not doing anybusiness or not in operation andintends to cease its existence. The CRSprovides defaulter companies anopportunity to file their overduestatutory returns and annual accounts.This scheme is applicable to allunlisted companies. Initially, in Julythe overdue documents can be filedwith normal filing fee plus one half ofthe normal filing fee as additionalfiling fee. However, in August the feesshall increase to normal filing fee plusone time additional filing fee. Thisscheme also absolves the defaultercompanies of penalties imposed onfiling of overdue documents. TheCEES allows the companies having noassets or liabilities and not doing anybusiness to avail themselves of easyexit facility without undergoing thecumbersome winding up procedure.
NEW YORK
AGENCIES
The S&P 500 and the Nasdaq posted their best dailypercentage gains since December on Friday after anagreement by European leaders to stabilize the region’stroubled banks, a pact that helped remove some of theuncertainty that has plagued markets.
“That is the major question. Can this fuel a longer-term rally? It can, but only to some degree if, over theweekend and the course of next week, we don’t see anymajor push back or headlines that suggest that thisdeal is not going to happen,” said Quincy Krosby, amarket strategist at Prudential Financial.
“But I don’t think this is a major game changer. Ido, however, think that this is really the first time wegot a relatively immediate answer to what they (theeuro-zone leaders) are going to do about the issue.”
Under pressure to prevent a catastrophic breakupof their single currency, euro-zone leaders agreed onFriday to let their rescue fund inject aid directly intostricken banks starting next year and intervene in bondmarkets to support troubled member-states. They alsopledged to create a single banking supervisor for euro-zone banks based around the European Central Bank ina landmark first step toward a European banking unionthat could help shore up struggling member Spain.PARTY TIME: Wall Street’s previous reaction toeuro-zone bailout packages or other rescue plans hadbeen somewhat muted. Initial gains would quickly dis-appear by the day’s end as investors realized that thereisn’t a quick fix to the region’s problems.
On Friday, it was a different story. The three majorU.S. stock indexes jumped 1.5 percent to 2 percentshortly after the opening bell on news of the euro-zoneagreement. By the close, stocks ended at session highswith the major indexes up between 2 percent and 3 per-cent. The Dow Jones industrial average .DJI surged277.83 points, or 2.20 percent, to end at 12,880.09.The Standard & Poor’s 500 Index .SPX jumped 33.12
points, or 2.49 percent, to finish at 1,362.16. And theNasdaq Composite Index .IXIC shot up 85.56 points,or 3.00 percent, to close at 2,935.05. For the week, theDow rose 1.9 percent, the S&P 500 advanced 2 percentand the Nasdaq gained 1.5 percent. For the month, theDow added 3.9 percent, the S&P 500 rose 4 percentand the Nasdaq climbed 3.8 percent.
But for the second quarter, the Dow dropped 2.5percent, the S&P 500 slid 3.3 percent and the Nasdaqlost 5.1 percent. Despite the weak second quarter, thethree major U.S. stock indexes wrapped up the firsthalf of the year with decent gains: The Dow was up 5.4percent, the S&P 500 was up 8.3 percent and the Nas-daq was up 12.7 percent.
“The next question is whether the ESM/EFSF willhave enough capital and assuming they don’t, will theECB chip in by giving it a bank license, thus leveragingits size. That is yet to be determined,” said Peter Boock-var, equity strategist at Miller Tabak & Co in New York.
“For now, party on and turn that hourglass over asmore time has been bought. But only the symptoms are
being fought as the underlying disease of excessive debtand lack of growth still remains.”
The leaders of the 17 European Union countriesagreed on a series of short-term steps to shore up theirmonetary union and bring down the borrowing costs ofSpain and Italy, seen as too big to bail out.
To that end, the euro zone’s temporary EuropeanFinancial Stability Facility (EFSF) and permanent Eu-ropean Stability Mechanism (ESM) rescue funds willbe used “in a flexible and efficient manner in order tostabilize markets” to support countries that complywith EU budget policy recommendations, a joint state-ment said. Any market reaction to further develop-ments next week could be exaggerated bylighter-than-usual volume. Wall Street trading desksmay be more sparsely populated because it will be ashort week. The U.S. stock market will be closed onWednesday, the Fourth of July, in observance of Inde-pendence Day. That could break any weekly momen-tum when Wall Street resumes trading on Thursday.ALL EYES ON THE ECB: The market’s focus shiftsto the European Central Bank next week as investorswait to see whether it cuts interest rates to complementthe measures taken by EU leaders to shore up banksand bring down borrowing costs for Spain and Italy.
Most economists polled by Reuters expect the ECBto cut borrowing costs on Thursday, July 5, at its meet-ing, which takes place against a darkening economicbackdrop. But internal resistance to the central bankreviving its bond-buying program remains high. TheECB has already loosened its collateral rules to make iteasier for banks in Spain to access its funds.
“Investors have to be cautious because the marketmay be getting ahead of itself. We really don’t have anydetails. The big question is still what direction the ECBtakes next week,” said Omer Esiner, chief market analystat Commonwealth Foreign Exchange in Washington.“It’s (the EU deal) certainly not a silver bullet for the debtcrisis, but the market is kind of acting like it is. It may setus up for another push down in the weeks ahead.”
Can EU deal lift stocks for more than a day?
Gracias! Under pressure to prevent a catastrophic breakup of their
single currency, euro zone leaders agreed to let their
rescue fund inject aid directly into stricken banks from
next year and intervene on bond markets to support
troubled member states
Stocks finished the first
half of the year with a bang
as investors welcomed
news that the euro zone is
a step closer to solving its
30-month-long debt crisis.
Now for the question: Is
this rally strong enough to
last for more than a day?
PRO 02-07-2012_Layout 1 7/2/2012 12:39 AM Page 1
02Monday, 2 July, 2012
CBC pre-budget meeting forfiscal year 2012-13KARACHI: The Pre-budget meeting for fiscal year 2012-13 was held atCBC main office, Chaired by President CBC Brig Anis Ahmed. Accordingto details, Cantonment Executive Officer Mumaamd Hayat Mahr briefedPCB about the developed works of CBC in 2011-12 and highlighted thesuggestion for the next fiscal budget. Later a monthly board meetingwas held, the agenda was presented and approved by the board. BrigAnis Ahmed ordered that all sewerage lines and drain system should beclean and clear before Mansoon rain, and Starts the cleanliness andproper lighting in graveyards for Shab-e-Barat. PCB ordered that thenew Identification and Complaint Cell should be operated withimmediate effect so that the residents should be benefited with theservices provided by the Cell and should further bridge, thecommunication gap between the board and the residents. PRESS RELEASE
Tetra Pak creates recycling awareness
LAHORE: Tetra Pak, the world leader in food processing and packagingsolutions, joined hands with WWF-Pakistan to organise its firstenvironmental advocacy seminar. Over 20 paper industry stakeholdersincluding major paper mill owners in Sindh, beverage carton collectors andcivil society organisation representatives, attended the seminar, talked onvarious industry related issues and learnt of innovative ways to recycleused beverage cartons for greater profitability. The objective of theseminar was to strengthen the relationship between Tetra Pak Pakistanand paper industry stakeholders to drive the recycling rate of beveragecartons in Pakistan. Dirk Herrmann, Cluster Leader Environment, GreaterMiddle East, Ferid Ekmekcioglu, Cluster Recycling Technical Officer, KashifBhatti, Marketing Director and Jawad Ahmed, Environment Manager fromTetra Pak Pakistan, Marriyam Aurangzeb, Manager Corporate RelationsWWF - Pakistan spoke at the seminar. PRESS RELEASE
PTCL 3G EVO dongle now a Wi-fi hotspotISLAMABAD: Pakistan Telecommunication Company Limited (PTCL) hasintroduced an innovative new 3G enabled Tenda router, empowering its3G EVO Wireless Broadband customers to create a dynamic Wi-Fihotspot virtually anywhere. PTCL’s EVO and Nitro dongles can now beconverted into powerful Wi-Fi hotspot using a portable 3G Wi-Fi Tendarouter, which provides Internet connectivity to multiple users formultiple Wi-Fi devices at the same time. Allowing any PTCL EVO/NitroUSB to connect up to 5 Wi-Fi enabled devices simultaneously, theamazing Tenda 3G EVO router is battery powered and offers supportfor plug-ins of EVO and Nitro USB modems. PRESS RELEASE
Groundbreaking new offerslaunched by WaridKARACHI: Keeping the tradition of launching consumer-centricpromotions, Warid Telecom with the aim to best serve its customersnow introduces amazing ‘ Power Pack’ in addition to new exciting SMSBundles. Power Pack is one of its kind unique offer available in townwhich includes 5MB of Internet, 5 free on-net minutes, and 100 SMSon any network in just Rs.4.99+t. The new exciting SMS bundlesinclude 500 daily SMS in just Rs. 3.5+t and 1000 weekly SMS in justRs. 6.99+t for all networks. PRESS RELEASE
Marketing Conference 2012 to be held on 5thKARACHI: Pakistan’s leading conference producers The TerraBizGroup is organizing the Marketing Conference 2012 entitled ‘Inspire& Ignite Marketing Excellence’ on July 05, 2012 at Pearl Continentalhotel in Lahore. The conference will feature various top-notchnational and international marketing gurus including the best-selling author & world’s renowned speaker on creativity & ideageneration Fredrik Härén as the keynote speaker, and R andallBlackford, General Manager Middle East, North Africa, Turkey, andPakistan, KFC. PRESS RELEASE
Millat Tractors sells 32,000 tractors LAHORE: Despite of poor economic conditions prevailing in the year2011-12, Millat Tractors Limited achieved the sale of 32,000 tractorsproduced in this span. Thus, MTL grabbed 64 percent share in thelocal tractor industry. During the financial year 2011-12, country’ssocio-economic condition went worse, it has particularly affected thesales of tractors. In the first eight months, General Sales Tax was 16percent which was later reduced to 5 percent. The heavy rains duringJuly and August extremely affected the crop. Furthermore, Agriculturaland Commercial banks did not offer facilitating agricultural loans. ButMTL tried to serve the industry better throughout. PRESS RELEASE
CORPORATE CORNER
Business
PROJECT SYNDICATE
RObERT b ZOELLICK, AHMAD M AL-
MADANI, DONALD KAbERuKA,
HARuKIKO KuRODA, THOMAS MIROw,
LuIS A MORENO
THE world is now inthe fourth year ofthe Great Recession.So far, theeconomies belong-
ing to the World Trade Organiza-tion have resisted the kind ofwidespread protectionism thatwould make a bad situation muchworse. But protectionist pres-sures are building as weary politi-cians hear more and more callsfor economic nationalism.
The WTO’s best defense ofopen trade is a good offense. A newWTO Trade Facilitation Agreementwould benefit all by increasing de-veloping countries’ capacity totrade, strengthening the WTO’s de-velopment mandate, and boostingglobal economic growth. More thana decade after the launch of theDoha Round of global free-tradetalks, this agreement could be adown payment on the commitmentthat WTO members have made tolinking trade and development.
Developing countries stand togain the most from improvingtrade facilitation. The right supportwould help traders in poorer coun-tries to compete and integrate intoglobal supply chains.
There are rich opportunitiesfor gains. Inefficiencies in process-ing and clearing goods put tradersin developing countries at a com-petitive disadvantage. Outdatedand inefficient border proceduresand inadequate infrastructureoften mean high transaction costs,long delays, opportunities for cor-ruption, and an additional 10-15%in the cost of getting goods to mar-ket – even more in landlockedcountries. Research by the WorldBank suggests that every dollar ofassistance provided to supporttrade-facilitation reform in devel-oping countries yields a return ofup to $70 in economic benefits.When funds are directed at im-proving border-management sys-tems and procedures – the veryissues covered by the trade-facilita-tion negotiations – the impact isparticularly significant.
Projects aimed at boosting effi-ciency and transparency, sup-ported by development banks andbilateral donors, have made a dra-matic difference. In East Africa,procedural improvements have re-duced the average clearance timefor cargo crossing the Kenya-Uganda border from almost twodays to only seven hours. InCameroon, some of our organiza-tions have worked with the WorldCustoms Organization to help thecustoms authority reduce corrup-tion and increase collection of rev-
enues – estimated to be more than$25 million a year.
On the Laos-Vietnam border, asub-regional cross-border trans-port agreement has cut cargo tran-sit times from four hours to justover one hour. A new customscomponent to a highway projectbetween Phnom Penh and Ho ChiMinh City helped increase the totalvalue of trade through the Moc Bai-Bavet border by 40% over threeyears. In Peru, some of our bankshave worked with internationalfreight forwarders to connect re-mote villages and small businessesto export markets through nationalpostal services, turning more than300 small firms into exporters,most for the first time.
The outlines of a new WTOTrade Facilitation Agreement arealready clear, but some technicaldifferences remain on specific pro-visions. Developing countries wanta credible commitment to supportimplementation, such as technicalassistance and capacity-building. AWorld Bank study estimates thatthe costs of implementing themeasures likely to be covered by aTrade Facilitation agreementwould be relatively modest – $7-11million in the countries studied,spread out over a number of years– especially when compared to theexpected benefits.
Capacity-building and financ-ing programs for governments that
want to improve their trade facili-tation are available already. Majordonor countries and internationaldevelopment organizations haveput a priority on, and increased in-vestment in, trade facilitation. Ac-cording to the OECD, from 2002 to2010, trade facilitation-related as-sistance increased ten-fold in realterms, from almost $40 million tonearly $400 million.
The African DevelopmentBank, the Asian Development Bank,the European Bank for Reconstruc-tion and Development, the Inter-American Development Bank, theIslamic Development Bank, and theWorld Bank stand ready – alongsidethe WTO – to assist developingcountries through the process of fulland effective implementation of theagreement. That means helpingcountries to assess their trade-facil-itation needs on a case-by-casebasis, match those needs with theresources required, and broker part-nerships between recipient coun-tries and development allies toensure that support is providedquickly and efficiently. In interna-tional negotiations, there is always away forward if the benefits of anagreement are shared by all. Tradefacilitation offers a developmentdividend for all countries. It is timefor WTO members to makeprogress on issues where there isroom to do so. It will be a down pay-ment on a solid investment.
How to make trade easier
KARACHI: Karachi Press Club secretary Moosa Kaleem and President TahirHaasan Khan presenting a shield to CEO of Qubee Jamal Nasir Khan duringhis visit to Club, Qubee CEO announced that he would provide internetservice free of cost to journalists at KPC.
KARACHI: LG Electronics (LG), a global leader and technology innovatorin consumer electronics, recently announced the launch of its latest2012 Cinema 3D Smart TV line-up in Pakistan. Picture shows DY Kim,(centre), President of LG Electronics, Gulf EZE along with other officialsof LG Electronics at the unveiling ceremony.
NEWS DESK
As Pakistan moves toward Euro II regime,consumer will have to bear the additional costfor compliance with the Euro II emissions forFuel, transportation and cars. A major sourceof air pollution, namely emissions from roadtraffic, can be reduced through enforcementof control standards. A standardized evalua-tion scale was set up by the European Unionback in 1992. These standards are generallyknown as the European Emission Standards(or Euro Standards). They provide limits forexhaust emissions of all new vehicles. Thelimits are set at various degrees for varioustypes of vehicles. Pakistan now looks forwardto omitting the current vehicular emissionstandards and moving a step ahead towardsthe European Emission Standards to stand inline with other countries of the region movingtowards Euro III and Euro IV. Pakistan is yetto employ these vehicular emission controls inorder to create environment-friendly vehicles.
Previously, the major barrier in the wayof the employment of these emission stan-dards in Pakistan was the cost. Now, the gov-ernment has decided to apply the EuroEmission Standards in the country with ef-fect from July, 2012. For this reason sessionswere conducted by the Pakistan EnvironmentProtection Agency with all stake-holders,comprising the Ministry of Petroleum, Min-istry of Environment, oil companies and au-tomobile producers. In these sessions, thequality of the fuel was seriously emphasizedas a prime matter of concern.
To fulfill the requirements of the EuroII-compliant policy, the oil marketing com-panies will need to import Euro II fuel whilethe cost of production of the auto manufac-turers will also increase. Public transportalso needs to be Euro II-compliant. Thiswill consequently increase the prices ofpublic transport vehicles which will defi-nitely raise fares. These measures will in theend affect the consumer.
To operate in accordance with the stan-dards of Euro II, the oil refineries are re-quired to be up-graded in term of installingdesulphurization unit which cost over $200mn. This process of up-gradation re-quires heavy investment. Automobile manu-facturers need to produce vehicles complyingwith Euro II standards. Some are alreadymanufacturing models complying with EuroII and Euro III standards. For instance allhigh end (1600cc and above) are Euro IIcompliant. However all small economy carsneed major spec change in term of engineand exhaust to be Euro II compliant.
All major OEMs are working towardmaking their product Euro II compliantbut they fear that consumer will have topay the costs of EFI engines, exhaust sys-tems and catalytic converter. Even if OEMsintroduce Euro II compliant vehicle thelack of Euro II compliant fuel speciallydiesel will create problem.
Commenting on the situation GeneralManager Commercial & Corporate PakistanRefinery Limited, Aftab Hussain, said in aninterview that the government is takingsteps towards complying with the EuroEmission Standards and that in this regardthe specifications of Euro II are being ful-filled for petrol engines. However, for Dieselengines, Diesel hydro-treaters are to be in-stalled to decrease the amount of sulphurparticles from the Diesel fuel.
As per the government’s Euro II-com-pliant policy, catalytic converters are to beused that fulfill the requirements of Euro IIstandard fuel. Basically there are two typesof engines. One is the EFI engine and theother is the carburettor engine. EFI standsfor Electronic Fuel Injection. The EFI sys-tem enhances the performance of the en-gine and controls emission. Most of the newmodels are equipped with the EFI system,with a built-in diagnosis system. The carbu-rettor engine system can produce as muchhorsepower as an EFI engine. The only fac-
tor applied is tuning which makes the car-burettor engine more efficient. The EFI sys-tem is more easily compatible with thecatalytic converter than the carburettor en-gine. The entire conversion procedure costwould up to $ 300. However, for carburet-tor engines, it would cost from US $ 500 to$ 2,500, which would consequently raisethe prices of vehicles quite substantially.Moreover, as the rupee is depreciating,there will be a notable increase in the pricesof these vehicles.
The new measure taken by the Govern-ment of Pakistan to reduce the amount ofpollutant particles from automobiles by im-plying the Euro Emission Standards i.e. EuroII, would have some major impacts.
Since the main aim of the Euro EmissionStandards is to decrease the amount of emis-sions from the fuel, it would definitely have apositive effect on the environment. Euro IIwould help in enhancing the air quality withminimum presence of smoke, carbon monox-ide and other hazardous gases in the atmos-phere. Serious air pollution issues occurspecifically in the urban areas, forming hazeand smog in winter which leads to respira-tory diseases as well as economic loss. By theintroduction of Euro Emission Standards,these drawbacks would hopefully be reducedin the cities. The introduction of Euro II com-pliant standards would also help in reducingnoise pollution.
Since the cost of conversion of the con-ventional engine systems to catalytic con-verter is quite high, it would increase theprices of Euro II-compliant vehicles.
Therefore, while the introduction of EuroII standards would be advantageous for theenvironment, car buyers and vendors wouldbe negatively impacted. For this reason,newer strategies need to be formulated by thegovernment. Hence, it is the consumer whobasically has to pay to the detriment of savingthe environment, which should be consid-ered positive.
Consumer to bear cost of Euro II
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